The legal landscape surrounding the maritime industry is continuously evolving, with the latest development being the introduction of the FuelEU Maritime Regulation, aimed at accelerating the sector’s uptake of renewable and low carbon fuels. In response, BIMCO has published the BIMCO FuelEU Maritime Clause for Time Charter Parties 2024. In this article, we examine the key elements of this clause that require detailed consideration. By exploring these nuances, we aim to provide stakeholders with a comprehensive understanding, enabling them to navigate this new clause successfully.
Understanding the clause’s approach to biofuels
One of the key aspects of the BIMCO clause is its approach to biofuels. Unlike some interpretations suggest, the clause does not grant charterers the automatic right to supply biofuels or other alternative fuels. Instead, it expressly stipulates an option for charterers to provide compliant fuels, provided these fuels are explicitly listed as acceptable in the charter party’s bunker clauses. This distinction is important, as it requires parties to engage in negotiations upfront, considering the vessel’s specific features, trading area, and the diverse properties of different fuel types.
The emphasis on compliant fuels rather than unrestricted biofuel supply is strategic. It aims to accommodate the growing interest among charterers to use biofuels as a tool for meeting FuelEU Maritime requirements whilst maintaining operational flexibility. This approach also encourages review and potentially adjustment of the bunker clauses to facilitate the supply of biofuels, a point highlighted by the clause’s inclusion of a “health warning” to prompt careful consideration during contractual negotiations.
Oversupply as a cash-back strategy
A concern raised in relation to the BIMCO clause is that charterers might use the clause by oversupplying biofuels or other alternative fuels, expecting compensation for such supply. However, the clause contains clear safeguards to prevent such scenarios. Specifically, reimbursement to the charterers pursuant to the clause requires that the charterer has already paid a surcharge to the owners, and it is limited to instances where a negative compliance balance is reduced or eliminated, i.e. up to zero and not above.
This means that according to the standard wording of the clause, the charterers are not entitled to reimbursement for a positive compliance balance, ensuring that the mechanism rewards genuine compliance rather than accumulation of compliance points for a cash back benefit. The exception to this principle is when parties agree to activate optional subclause (m), which introduces a settlement mechanism triggered either upon redelivery or an agreed and specified number of days after June 30. This optionality provides a flexible framework for commercial settlements, tailored to the parties’ needs and agreements.
Pooling and compliance balance: Timing is key
The clause also introduces a pooling mechanism for charterers, enabling them to pool positive and negative compliance balances if the vessel is chartered for an entire reporting period, from January 1 to December 31. This provision underscores the importance of strategic timing, particularly concerning delivery and redelivery schedules, as well as the charter period’s duration.
This mechanism is beneficial for charterers who want to maximise the value of compliance balances by trading such compliance balance in a pool. However, it places the responsibility on charterers to make informed decisions and communicate banking, borrowing, or pooling instructions by the mutually agreed deadline.
Settlement mechanism for compliance balances
Another area where the BIMCO clause demonstrates flexibility is in the settlement of compliance balances. Although the novelty of the FuelEU Regulation and associated indexes expected to emerge for pricing compliance balances, the clause allows parties to agree on a settlement mechanism under optional subclause (m). This provision is particularly useful when parties wish to specify a currency and amount, facilitating a customised commercial agreement.
The clause’s adaptability in this regard helps address industry concerns about the value of compliance balances, providing a structured yet flexible approach to settlement. It also emphasises the importance of transparent negotiations and mutual agreement, enabling owners and charterers to craft solutions that best suit their operational and FuelEU Maritime compliance/strategic planning objectives.
Navigating the complexities of the FuelEU Multiplier
One of the more complex aspects of the FuelEU Maritime Regulation is the FuelEU Multiplier, which can significantly impact new charterers. The multiplier increases the FuelEU penalty by 10% for each consecutive year of non-compliance. The multiplier is therefore an aspect of importance and charterers are strongly encouraged to conduct a thorough due diligence on a vessel’s compliance history before entering into a charter agreement. Charterers need to be fully aware of the vessel’s past compliance records to strategically plan their approach, avoiding unexpected costs linked to the FuelEU multiplier.
Conclusion: Strategic planning and clear communication for effective compliance
The BIMCO FuelEU Maritime Clause for Time Charter Parties 2024 introduces a comprehensive framework that balances regulatory compliance with commercial flexibility. However, its effective implementation requires a clear understanding of its provisions, strategic planning, and transparent communication between owners and charterers.
Key takeaways:
- Careful negotiation of bunker clauses to clearly define acceptable compliance fuels
- Awareness of reimbursement limitations to prevent misconceptions about potential compensation
- Strategic timing and decision-making to maximise the benefits of pooling positive compliance balances
- Thorough due diligence on a vessel’s compliance history to avoid unforeseen multiplier effects.
By proactively addressing these considerations, owners and charterers can not only ensure compliance with FuelEU Maritime requirements but also leverage the clause’s flexibility to achieve operational efficiency in a time charter party context. Owners having technical management outsourced to third party technical managers should also consider the FuelEU Maritime Clause for SHIPMAN.
This proactive and strategic approach is essential as the maritime industry continues to navigate the evolving regulatory landscape, ensuring that both owners and charterers can adapt to new challenges while capitalising on emerging opportunities.
16.06.2025
